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27 Cards in this Set
- Front
- Back
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What is rational behaviour of the consumer |
Aim to maximise utility |
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What is the rational aim of the producer |
Aim to maximise profits |
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Define marginal utility |
Marginal utility is the increase in total utility of the consumption of one extra unit of a good or service |
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Define diminishing marginal utility |
Diminishing marginal utility suggests that as successive units are consumed, marginal utility from each extra unit will fall |
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Define unemployment |
Economically active but not presently in work |
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Define economically inactive |
Not looking to join labour supply eg students and housewives |
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Costs of unemployment |
1 decrease in a aggregate supply - negative multiplier effects - balance of trade 2 increase government spending - social protection (Jobseeker’s Allowance) - opportunity cost of this spending - also a loss in tax receipts with further negative effects 3 socioeconomic effects - increase in crime
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Define comparative advantage |
Comparative advantage occurs when a country can produce a good or service with a lower opportunity cost than another country |
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Define absolute advantage |
Absolute advantage occurs when a country can produce a good or service at a lower cost than another country |
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Define the multiplier |
A change in input causes a larger change in output |
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How to calculate the multiplier define economies of scale |
1/mps = 1/1-mpc |
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Define economies of scale |
When unit costs fall as output increases |
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Define diseconomies of scale |
Unit costs rise as output increases |
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Features of a monopoly (5) |
1. One dominant firm - 25% market share for legal monopoly 2. Unique product 3. Price setter 4. High barriers to entry / exit 5. Asymmetric information |
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Why can x-inefficiency occur within a monopoly |
Monopolists are under little pressure to maximise efficiency / minimise costs |
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Define price discrimination |
Price discrimination occurs when a firm charges different prices to different consumers |
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What are the three necessary conditions for price discrimination |
1. High monopoly power - high barriers to entry & a price maker 2. Consumers with differing elasticity of demand values - so the monopolist can charge a high price to consumers with inelastic PED and lower prices to consumers with elastic PED. 3. Resale preventable - avoid consumers buying goods in a low price market and reselling for cheaper than the high price |
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Xbrief |
X |
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Briefly state the 3 main factors which affect exchange rates |
1 imports and exports 2 differing rates of inflation 3 capital movements |
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Define price elasticity of demand |
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price |
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Name price elasticity of demand values |
0 - perfectly inelastic 0-1 - relatively inelastic 1 - unit elastic 1+ - relatively elastic |
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Define cross price elasticity of demand |
Cross price elasticity of demand measures the responsiveness of quantity demanded of good X to a change in price of good Y |
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What are the types of CPED values / what do they mean i |
Positive CPED value - goods are substitutes - good for the consumer Negative CPED value - goods are complements 0 = no relationship |
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What is income elasticity of demand |
Income elasticity of demand measures the responsiveness of quantity demanded to a change in income |
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2 types of normal good and their YED values. |
Necessity 0-1 and luxury 1+ |
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What is an inferior products YED value |
Any negative value |
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X |
X |
